The Good Times Are Here?

Yes, that is right the good times are here. Now keep in mind, when I say good times I mean in a very specific part (a very very small part) of the economy.

I am talking about refinances.

The time is right and the rates are good. If you have any kind of equity position (I know, who does?) then most likely you can refi and drop your rate and your monthly payment. And with as low as the rates are, you might be able to drop your rate 1 percent which can save you a bunch of cash in your monthly mortgage payment and thousands in interest over the life of the loan.

Today, it all starts with the appraisal. So many people have a bigger mortgage balance than their house is worth. And because the house is "upside down", a lender will not take the risk and investment.

Now I can tell you that most of these upside down homeowners are going to be a good investment. They will certainly pay back their loan. They never miss a payment. But because by no fault of their own, they owe more than their house is worth, now suddenly they are not creditworthy.

So you're telling me that someone with a good mortgage history can't refinance but someone who had a foreclosure over 3 years ago can get a mortgage to buy a house?

Do you see how screwed up this finance business is?

Now some lenders may modify the terms for loans that they hold. But most won't. So you have a situation where a good paying customer is turned away and can't take advantage of the lower rates.

And in some cases, 2 years prior, the lender accepted the appraised value of a house and approved a mortgage for a buyer. Now 2 years later, that same lender will not approved a refinance because the value has gone down on that same house.

Now think about this.

The lender would be still holding the loan without doing the refinance. But what do you think puts more pressure on the borrower? The current loan with the higher rate or the new loan with the lower rate?

I'll wait for your answer............

Very good!! I would think , logically, that with the hardships that are associated with this economy, a lender would want to make sure that they would get their money back and allow good payers to refinance if they are upside down.

The word "logic" is open for interpretation.

Somehow the lenders are missing a little piece of trivia. I don't know the stats but I'm sure there are homes that could have been saved from foreclosure by allowing a refinance when the house has dropped it's value below it's current appraised value.

And doesn't that foreclosure hurt values in a neighborhood where that uncooperative lender has other investments?

Logic.

It's a beautiful thing.

If you have any comments on this article, I would love to hear what you have to say!

Feel free to comment below. Thanks for reading!

Dan Tenchall
Great Lakes Mortgage Funding

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